Stocks in retail, resources and industrial sectors led the benchmark S&P/ASX 200 Index into its fourth day of losses. The bourse closed down 0.16 per cent at 4959.4, its lowest level in six weeks.

The release of the HSBC’s Chinese purchasing managers index (PMI) brought some hope to investors early in the day as it showed manufacturing activity in China had increased over February.

The S&P/ASX 200 rose 0.3 per cent after the data release, which showed manufacturing activity in China rose to a two-month high in March. The PMI rose to 51.7, up from 50.4 in February, where scores above 50 indicate an expansion in activity.

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But early signs of enthusiasm waned following the release of the ACCI-Westpac Survey of Industrial Trends at around midday. The quarterly survey revealed that output and new orders for the manufacturing sector continued to slump throughout the March quarter.

The market struggled for direction after Labor minister
Simon Crean
urged the party to conduct a spill meeting to decide the future of Prime Minister
Julia Gillard
.

After the market closed,
Kevin Rudd
announced he would not challenge for the leadership. Ms Gillard was re-elected unopposed by the caucus.

Credit Suisse equity strategist Damian Boey said the prospect of a federal leadership spill boded favourably for the local market as it signalled a potential end to the instability associated with a hung Parliament.

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“The confidence effect is that at least fiscal policy might be freer to do something more meaningful to the economy . . . people will be able to see where stimulus is coming from," he said.

Even as the index continued its backward slide, stocks in the energy, banking, telecommunications and healthcare sectors posted gains.

Banking stocks exhibited mixed signs. Westpac, ANZ Banking Group and AMP were among the biggest contributors to index gains on Thursday after three days of losses across the ­sector.

Mr Boey said the ACCI survey revealed a stronger willingness for banks to lend money.

“What the survey also made apparent was that the willingness of banks to lend is improving for the first time since 2007 . . . they’re easing credit standards," Mr Boey said.

Westpac rose 0.47 per cent to $30.08 and ANZ added 1.11 per cent to $28.14. AMP also closed up, rising 2.79 per cent to $5.16.

Commonwealth Bank ended the day in negative territory, shedding 0.74 per cent to $68.65. National Australia Bank lost 0.46 per cent to $30.35 and Macquarie Group closed 3.41 per cent lower at $35.72.

Watermark Funds Management portfolio manager Justin Braitling described bank stocks as sitting in the “sweet spot" of the local economy.

“They’ve set themselves up for weak credit growth. They’ve been focusing on costs, but what they didn’t expect was an improvement in funding costs over the last quarter," he said.

Mr Braitling argued that a reduction in funding costs has driven interest margins higher at a time when costs have been whittled down.

“We’re seeing a one-off windfall," Mr Braitling said.

Stocks in cyclical sectors posted some of the biggest losses over the day. Wesfarmers, the owner of Coles supermarkets, fell 1.95 per cent to $40.30. Woolworths dropped 0.71 per cent to $33.73 after UK supermarket chain Tesco announced it would be ramping up its online supermarket offering throughout Asia.

Large-cap miners Rio Tinto and Fortescue Metals Group clawed back ground, shrugging off bearish forecasts on the outlook for the iron ore price that were released this week. Rio gained 1.43 per cent to $58.30, Fortescue climbed 2.89 per cent to $3.91 while BHP Billiton fell 0.39 per cent to close at $33.49.

David Jones rose 0.32 per cent to $3.07 on the same day brokers including JPMorgan, Morgan Stanley and Goldman Sachs upgraded their ratings for the stock.

Meanwhile, shopping centre group Westfield posted its 10th loss in the past 11 days following the conclusion of a share buyback program on March 13.

“Despite what people say, I just don’t think there are any real signs of cyclical up-tick in the economy," he said, adding that the latest round of indicators, including agency advertising spend, building approvals and transport data, still portray a weak outlook for the sector.

The Australian sharemarket was buffeted earlier this week following a decision by European policymakers to impose a levy on all deposit holders in Cyprus to help repay national debt.

However, an assurance from US Federal Reserve Bank governor
Ben Bernanke
that quantitative easing would continue saw investors return to the market on Thursday with a new sense of confidence.

“The key thing about the developments in Cyprus is that it keeps policymakers like Bernanke and [European Central Bank president Mario] Draghi talking about easing," Mr Boey said.

“Usually investors would expect to see growth led by innovation and productivity gains, but we know in the US and in other parts of the world that isn’t happening. The only thing we have to look forward to is stimulus."